EU and USA trade deal slows Czech GDP growth

The trade agreement announced between the European Union and the United States is set to impact the economic growth of the Czech Republic. The Ministry of Finance of the Czech Republic has estimated that the introduction of a 15 percent flat tariff on imports from the EU to the USA will slow the growth of the Czech GDP by 0.2 percentage points in 2025 and by 0.39 percentage points in 2026. While this seems detrimental, the Ministry has noted that the negative effects of the tariffs could be offset by improvements in the Czech economy and positive impacts from the German fiscal package expected to take place in 2026. The agreement, which encompasses a range of goods, including steel and aluminum, was announced recently, with the tariffs set to take effect on August 1, 2025. Current expectations have been downgraded, with the Ministry's forecasts reflecting a 0.3 percentage point reduction in growth outlook relative to earlier predictions, mainly due to expected American tariffs on automobiles, steel, and aluminum. The Czech Ministry projected GDP growth of 2 percent for this year, following a modest growth of 1.1 percent last year. The impact of American tariffs has been a significant factor in adjusting the Czech economic growth outlook. Although a higher tariff of 20 percent against the EU was announced in early April, its implementation has been postponed by 90 days. If it were to take effect, the Czech GDP growth would only increase by 1.6 percent instead of the projected 2 percent this year. This reflects how existing and potential tariffs can dramatically alter economic forecasts and performance for countries heavily reliant on trade. In light of these developments, the Ministry of Finance is preparing an updated macroeconomic forecast, which will consider the newly announced tariffs. This forecast will be presented on August 21, 2025. The Ministry has acknowledged that the actual impact may change upon identifying all items that could be exempt from the tariffs, indicating a cautious approach to assessing the long-term implications of international trade relations on the Czech economy.